A Live Fed Meeting
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Article Type
Insights
Topic
Multi-Asset
Published
July 28, 2026
Read time
5 mins
Authors
Jordy Hermanns, CFA
Edwin Boon
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A summer lull? Not this time. The July FOMC meeting looks unusually divided, and markets are struggling to interpret the Fed’s reaction function amid energy-inflation volatility, political pressure and the new Fed President’s approach to forward guidance. Tomorrow’s Fed meeting is live!

Tomorrow’s meeting

On July 29, the Federal Reserve will announce its July FOMC decision. Often the outcome of a policy meeting is largely priced in well before the announcement. Policymakers typically use speeches, interviews and carefully calibrated communication to guide markets toward the likely decision.

This time is different. Market expectations are unusually divided, with pricing implying a meaningful probability of a rate hike rather than a clear consensus for either a hike or a hold. That makes this meeting genuinely “live” in a way that has become rare in recent years.


The uncertainty reflects a difficult policy backdrop. Inflation has not returned decisively to target and energy prices have been moving with volatile headlines about the Iran conflict. At the same time, the lagged impact of previous tightening still argues for caution.

For Kevin Warsh, the decision in his second meeting as Fed President is also about credibility. He has repeatedly stressed the importance of restoring price stability and has signalled that the FOMC should not tolerate persistently elevated inflation. A hike, if delivered, would therefore be framed not only as a response to the data, but also as a signal that the Fed is willing to act without extensive guidance when inflation risks warrant it.

More “live” than usual

A meeting with roughly one-third probability of action is materially different from the recent norm. In previous tightening and easing phases, markets often had a clearer steer before the blackout period, including through official communication and, at times, well-sourced reporting in the financial press.


As a result, investors usually entered FOMC meetings positioned for a relatively narrow range of outcomes: a pause, a cut or a hike. The current set-up is less settled. If this reflects a deliberate shift away from heavy reliance on forward guidance, it could mark a change in the way policy risk is transmitted to markets.


Under Chair Warsh, the Fed appears more willing to preserve optionality until the meeting itself. That may be sound policy in an uncertain macro environment, but it also means markets likely face more policy surprises.


For investors, the implication is straightforward: policy meetings may become more important event risks again, with market reactions on the front end of rates curves, and across broader fixed income markets, equity markets and currencies.

Note: Market expectation of the monetary policy decision: either hold, one or more hikes or one or more cuts on the day before the FOMC decision. Market expectations derived from OIS pricing. Source: Aegon AM, Bloomberg. Data as per Jul-2026.

Fighting on more than one front

The Fed is not only navigating a challenging macroeconomic environment. It is also operating under political pressure, which raises the stakes around central bank independence.

President Trump has been vocal in calling for lower US interest rates. Against that backdrop, Chair Warsh may be reluctant to deliver a decision that could be interpreted as a response to political pressure. Demonstrating independence may therefore reinforce the case for a cautious, inflation-focused communication strategy. This does not mean the Fed will hike simply to prove its independence. But it does mean that the press conference and statement language will matter. 

Our expectations

Our base case is that the Fed remains on hold at this meeting.

Such a pause would allow policymakers to gather more evidence on the inflation impact of higher energy prices. We argue that it is very difficult to set policy now. In recent days, Iran headlines have moved from stability to escalation and renewed negotiations, while the Houthis’ attacks have added another layer of disruption and uncertainty. This has made energy prices volatile, driven not by economic demand but by exogenous supply shocks that are very difficult to base policy on.

That is why our base case is for the Fed to keep policy unchanged, effectively buying time to see how the energy situation evolves. That means the next meeting — on September 16 — is a “live meeting” too.

 

Important Information

Authors

Jordy Hermanns, CFA
Portfolio Manager
Jordy Hermanns, CFA, is a portfolio manager in the multi-asset group and serves as an investment strategist in the asset allocation team. Jordy is responsible for strategic and tactical asset allocation decisions on the asset allocation team.  
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Edwin Boon
Portfolio Manager
Edwin Boon is a portfolio manager specializing in rates markets, including money markets, sovereign securities and LDI portfolios. 
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